Strategic Case Analysis
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vs. buy decisions in its quest to deliver more value to its
customers, and create and capture more value for the business.
For example, software coding, testing, and QA can be done by
the off-shore arm of the company in India or Russia, so this is
a make as opposed to a buy decision. Alternately, these
activities can be outsourced to a third-party vendor overseas,
in which case this becomes a buy as opposed to a make
decision. If the company’s business is growing, and it has
been outsourcing software development to an outside vendor,
it might consider buying the vendor, or backward integrate, to
make in-house off-shored product development a core
competency.
Similarly, customer support activities can be done in-house or
outsourced to call-centers in the Philippines or India. Sales
can be done through channels or by a direct sales force. With
channel partners, the company might place a formal contract
to exclude its competitors from selling through the same
channel partner. The company might decide to forward
integrate or buy the channel partner, if it wants to build its
complementary assets.
Deciding to forward integrate, backward integrate, offshore,
outsource, making software development a core competency,
and building complementary assets such as a direct sales
team, are all strategic decisions. Irrespective of whether a
company is a manufacturing or a services company,
conducting a detailed value chain analysis can help the
company take these key strategic decisions more rigorously.
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